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The politics of energy forecasting: A comparative study of energy forecasting in western Europe and north America
International North-Holland
Journal
of Forecasting
133
5 (1989) 133-145
Book reviews The International
Journal
of Forecasting
Policy
The purposes of this section are to help our readers become aware of all books that are relevant to forecasting, and to emphasize those books making highly significantly contributions. The Book Reviews section will include a listing of Books Received and Reviews. Readers, authors and publishers are invited to contribute to the listings or to the reviews. If you would like to do a review, please contact us first to determine whether a review is already being done. (For exceptional books, we may publish more than one review.) In preparing a review, please follow referen.ce format given in the ‘Instructions to Authors’. The book reviews are being handled as follows: North and South America: Steven P. Schnaars Baruch College The City University of New York 17 Lexington Avenue NEW YORK, NY 10010 USA Rest of the world: Nigel Meade Imperial College of Science and Technology Department of Management Science Exhibition Road LONDON SW7 2BX UK Thomas Baumgartner and Atle Midttun, eds., The Politics of Energy Forecasting: A Comparative Study of Energy Forecasting in Western Europe and North America (Oxford University Press, New York, 1987) $67.00, E32.50, pp. 314. It is commonly argued by proponents of the use of empirical models in forecasting that those techniques are more precise and objective than impressionistic judgment-based approaches. Statistical models are presumed to be applications of the 0169-2070/89/$3.50
0 1989, Elsevier Science Publishers
scientific method, which assumes that researchers are dispassionate observers using procedures that minimize the impact of bias on resulting forecasts. This book contradicts such assumptions, asserting that, at least in the energy sector, forecasting models are far from objective. At the very least, they are creatures of researchers’ judgment in specifying assumptions underlying the mathematical equations or, for some, in choosing alternative scenarios for development. The main thrust of the book goes well beyond this, however, with the contention that forecasting models often become vehicles for advocating points of view and even are manipulated to fit the purposes of the advocates. The fact that complex statistical models give the appearance of rigor and objectivity merely increases their usefulness in promoting acceptance of their biased results. Forecasters themselves are players in this game, not disinterested observers. In fact, it is argued, energy forecasters cannot escape their participant role, because their forecasts influence the very processes that they are forecasting. Forecasts of energy supplies, for example, influence govemment energy policy and the actions of utilities, which in turn affect the availability of supplies. Largely because of the importance of forecasters in the policy process, they are subject to a variety of influences which combine to prevent their forecasts from being objective. The evidence for this thesis comes - in varying degrees - from essays describing energy forecasting practices at IIASA (International Institute for Applied Systems Analysis) and in eight countries: Germany, the Netherlands, Britain, Norway, Denmark, France, Canada, and the United States. Thirteen individuals contributed to this edited volume, providing a wealth of detailed inside information. No one expects the difficult task of energy forecasting to be totally value free. What is surprising is the prevalence of bias and energy forecasters’ apparent acceptance of it - indeed,
B.V. (North-Holland)
134
Book rec;~~s
the willingness of many to become partisan advocates. The authors are more concerned with describing this phenomenon than with explaining it. However, there are several underlying themes that run throughout the chapters, which may provide partial explanations. First, the work of energy forecasters - indeed, that of all researchers - is affected by their values, In part the values are their own; in part they are molded by environmental factors, including the organizations of which they are a part. Since the effect of values is largely subconscious, it is incumbent on the researcher to take measures to minimize their unnoticed impact. In the cases described here one has the impression that such a commitment often has been lacking. In fact, forecasting may be a means of expressing one’s value orientation. This seems true of environmental forecasters, who appear to be environmentalists first, forecasters second. Forecasting is an apparent vehicle by which they can express their commitment to preserving the ecology, resulting consistently in forecasts of low energy demand. Second, energy forecasters may be consciously influenced by the requirements fo their forecasting role, defined by the mission of their organization and the preferences of superiors or clients. Forecasters may choose to become advocates and color their forecasts accordingly because they perceive their role in the organization as requiring that of them. For example, the author of the essay on France, a former official of the utility Electricite de France (EDF), recalls how the changing role of that organization consciously affected the perspective of its forecasters:
The adoption of a commercial strategy by EDF in 1968 and the signing of the first contract with the state in 1970 changed the nature of the forecasting problem. French electricity forecasters stopped being neutral observers - or at least believing themselves to be such - in search of a likely estimate of the future. They instead acquired the function of active combatants in the battle for national energy independence. . . . The forecasting methods remained the same, at least in appearance, but they had now acquired a normative content (p. 190; author’s emphasis)
Third, energy forecasters seem to be influenced by an ‘establishment view’ of the future, which evidently exists both in the energy community and among environmentalists. In the energy community this common outlook is reflected in similar forecasts by government energy agencies, utilities, and other energy-related groups. It is difficult for a forecaster to swim against the tide of generallyaccepted projections, even when his best judgment runs counter to the dominant view. This results in an inclination to produce forecasts within parameters consistent with conventional wisdom - a perfect illustration of what psychologist Irving Janis has termed ‘groupthink.’ [Janis (1972).] Fourth, energy forecasters, especially those in government, are subject to intentional efforts to influence their forecasts by those who would use the forecaster’s work to promote their own viewpoints. For government forecasters the influence comes mainly from utilities, environmentalists, politicians, and other government agencies. These groups attempt to determine the choice of forecasting methods and assumptions; they provide needed data that the forecaster lacks; they seek to replace the data being used with data of their own. All of these efforts, of course, are geared to producing forecasts most favorable to themselves. The forecaster’s work in this way can be coopted by others who use it as support in advocating their positions. What is the reaction of the book’s editors to the lack of objectivity in energy forecasting and to the advocacy role of many forecasters? The editors not only accept this situation, but appear to argue its desirability. They emphasize the need to ‘move forecasting out of its detached scientific ivory tower’ and refer to ‘the fact that long-term societal futures cannot be objectively and accurately predicted, but actually must be highly normative and politically loaded.’ (p. 291) By taking this position the editors seem guilty of the logical fallacy of confusing ‘is’ with ‘ought.’ Because bias and advocacy forecasting are the order of the day does not mean that they should be acceptable. The only defensible position for professional forecasters is to faithfully project the future on the basis of their best judgment and professional expertise. This entails a commitment to minimize the impact of factors that would diminish the objectivity of their analyses. Granted, the challenge of controlling bias is great, especially
when forecasts are the basis of important policy decisions, and when forecasters are employees of organizations having vested interests in the results. However, merely because the task is difficult is no reason that the goal should be abandoned. Perhaps it was the editors’ stance on this point that precluded the logical sequel to the descriptive case studies, namely an exploration of ways to improve the objectivity of energy forecasts. The authors of the country essays seem to have been ideally suited for making such proposals, given their knowledge of the country environments within which the forecasts are made. The above criticism does not di~nish the book’s principal achievement of documenting advocacy and bias in energy forecasting, which complex statistical models can easily mask. The editors were successful in attracting contributors having intimate knowledge of forecasting practices in the eight case-study countries and at IIASA. The book is remarkably well integrated to have had thirteen p~ti~ipating writers, which undoubtedly is a result of the continuing guidance the editors provided to the contributors. The editors’ two introductory chapters set the stage well, and their two concluding chapters provide useful summaries of the contributors’ main findings. The book will be useful to a diverse audience, including not only forecasters, but also students of the energy industry, of interest group behavior, and of bureaucratic politics. Many forecasters will identify with the issues raised here and should be reassured in knowing that similar dilemmas they face are not unique, but are commonly shared by colleagues. Randall J. Jones, Jr. Central State ~n~ve~~ity, Oklahoma, USA
Reference Janis, Irving Company,
L., Victims of Groupthink Boston, 1972).
(Houghton
Mifflin
Robin M. Hogarth, Judgment and Choice: The Psychology ofDecision, Second edition (Wiley, New York, 1987) $24.95, 217.50, pp. 311. This second edition of Judgment and Choice builds upon the success of its predecessor. Forecasters
were exposed to an enthusiastic review of the first edition [Corbin (1982)], which cited its summaries of rigorous research while retaining a conversational style and inclusion of ‘thought experiments’ _ using ‘the readers basic intuitive judgment as its raw material’ (p. 219). In one example, Hogarth gives the reader a false outcome to an event, later demonstrating how the reader became convinced of the inevitability of the (false) outcome. The second edition retains these features and if anything, improves upon them. The treatment of judgmeent and choice involves forecasting because choice is seen as reflecting two types of judgement: predictive judgements (forecasts) and evaluative judgements. The quality of choice depends on the extent to which the forecasts are accurate and the evaluations faithfully reflect values. The forecasts of concern to Prof. Hogarth are subjective, intuitive forecasts. His discussion of choice is also relevant because forecasters are frequently called upon to predict choices: how many consumers will choose to pay a particular price for a product or service; how many people will apply for a particular job, or choose an early retirement option; investor choices, voter choices, etc. The first three-chapters of the book (and later, Chapter 6) concentrate on predictive judgements. His review of the psychological literature reads like a catalog of human judgmental fallibilities, including: misattribution of causes to random occurrences; incorrect (causal) interpretations of regression towards the mean, producing overly extreme forecasts for previously extreme observations; failure to appropriately incorporate base rate information into forecasts: inferring the probability of a future event on the basis of how easy it is to imagine the event happening; the lingering impact of whatever initial forecast value was considered, simply because it was the first considered, and adjustments from it are insufficient; use of only a few cues for prediction; use of redundant pieces of information in a forecast as if these were independent of other cues; and failure to seek potentially disconfirming evidence. Not unsurprisingly, the degree of confidence felt by people in such forecasts is misplaced. The reader’s resistance to accepting the validity of the research findings is lessened through Prof. Hogarth’s involvement of the reader in mental exercises where one finds oneself acting in just the way that re-
Journal
of Forecasting
133
5 (1989) 133-145
Book reviews The International
Journal
of Forecasting
Policy
The purposes of this section are to help our readers become aware of all books that are relevant to forecasting, and to emphasize those books making highly significantly contributions. The Book Reviews section will include a listing of Books Received and Reviews. Readers, authors and publishers are invited to contribute to the listings or to the reviews. If you would like to do a review, please contact us first to determine whether a review is already being done. (For exceptional books, we may publish more than one review.) In preparing a review, please follow referen.ce format given in the ‘Instructions to Authors’. The book reviews are being handled as follows: North and South America: Steven P. Schnaars Baruch College The City University of New York 17 Lexington Avenue NEW YORK, NY 10010 USA Rest of the world: Nigel Meade Imperial College of Science and Technology Department of Management Science Exhibition Road LONDON SW7 2BX UK Thomas Baumgartner and Atle Midttun, eds., The Politics of Energy Forecasting: A Comparative Study of Energy Forecasting in Western Europe and North America (Oxford University Press, New York, 1987) $67.00, E32.50, pp. 314. It is commonly argued by proponents of the use of empirical models in forecasting that those techniques are more precise and objective than impressionistic judgment-based approaches. Statistical models are presumed to be applications of the 0169-2070/89/$3.50
0 1989, Elsevier Science Publishers
scientific method, which assumes that researchers are dispassionate observers using procedures that minimize the impact of bias on resulting forecasts. This book contradicts such assumptions, asserting that, at least in the energy sector, forecasting models are far from objective. At the very least, they are creatures of researchers’ judgment in specifying assumptions underlying the mathematical equations or, for some, in choosing alternative scenarios for development. The main thrust of the book goes well beyond this, however, with the contention that forecasting models often become vehicles for advocating points of view and even are manipulated to fit the purposes of the advocates. The fact that complex statistical models give the appearance of rigor and objectivity merely increases their usefulness in promoting acceptance of their biased results. Forecasters themselves are players in this game, not disinterested observers. In fact, it is argued, energy forecasters cannot escape their participant role, because their forecasts influence the very processes that they are forecasting. Forecasts of energy supplies, for example, influence govemment energy policy and the actions of utilities, which in turn affect the availability of supplies. Largely because of the importance of forecasters in the policy process, they are subject to a variety of influences which combine to prevent their forecasts from being objective. The evidence for this thesis comes - in varying degrees - from essays describing energy forecasting practices at IIASA (International Institute for Applied Systems Analysis) and in eight countries: Germany, the Netherlands, Britain, Norway, Denmark, France, Canada, and the United States. Thirteen individuals contributed to this edited volume, providing a wealth of detailed inside information. No one expects the difficult task of energy forecasting to be totally value free. What is surprising is the prevalence of bias and energy forecasters’ apparent acceptance of it - indeed,
B.V. (North-Holland)
134
Book rec;~~s
the willingness of many to become partisan advocates. The authors are more concerned with describing this phenomenon than with explaining it. However, there are several underlying themes that run throughout the chapters, which may provide partial explanations. First, the work of energy forecasters - indeed, that of all researchers - is affected by their values, In part the values are their own; in part they are molded by environmental factors, including the organizations of which they are a part. Since the effect of values is largely subconscious, it is incumbent on the researcher to take measures to minimize their unnoticed impact. In the cases described here one has the impression that such a commitment often has been lacking. In fact, forecasting may be a means of expressing one’s value orientation. This seems true of environmental forecasters, who appear to be environmentalists first, forecasters second. Forecasting is an apparent vehicle by which they can express their commitment to preserving the ecology, resulting consistently in forecasts of low energy demand. Second, energy forecasters may be consciously influenced by the requirements fo their forecasting role, defined by the mission of their organization and the preferences of superiors or clients. Forecasters may choose to become advocates and color their forecasts accordingly because they perceive their role in the organization as requiring that of them. For example, the author of the essay on France, a former official of the utility Electricite de France (EDF), recalls how the changing role of that organization consciously affected the perspective of its forecasters:
The adoption of a commercial strategy by EDF in 1968 and the signing of the first contract with the state in 1970 changed the nature of the forecasting problem. French electricity forecasters stopped being neutral observers - or at least believing themselves to be such - in search of a likely estimate of the future. They instead acquired the function of active combatants in the battle for national energy independence. . . . The forecasting methods remained the same, at least in appearance, but they had now acquired a normative content (p. 190; author’s emphasis)
Third, energy forecasters seem to be influenced by an ‘establishment view’ of the future, which evidently exists both in the energy community and among environmentalists. In the energy community this common outlook is reflected in similar forecasts by government energy agencies, utilities, and other energy-related groups. It is difficult for a forecaster to swim against the tide of generallyaccepted projections, even when his best judgment runs counter to the dominant view. This results in an inclination to produce forecasts within parameters consistent with conventional wisdom - a perfect illustration of what psychologist Irving Janis has termed ‘groupthink.’ [Janis (1972).] Fourth, energy forecasters, especially those in government, are subject to intentional efforts to influence their forecasts by those who would use the forecaster’s work to promote their own viewpoints. For government forecasters the influence comes mainly from utilities, environmentalists, politicians, and other government agencies. These groups attempt to determine the choice of forecasting methods and assumptions; they provide needed data that the forecaster lacks; they seek to replace the data being used with data of their own. All of these efforts, of course, are geared to producing forecasts most favorable to themselves. The forecaster’s work in this way can be coopted by others who use it as support in advocating their positions. What is the reaction of the book’s editors to the lack of objectivity in energy forecasting and to the advocacy role of many forecasters? The editors not only accept this situation, but appear to argue its desirability. They emphasize the need to ‘move forecasting out of its detached scientific ivory tower’ and refer to ‘the fact that long-term societal futures cannot be objectively and accurately predicted, but actually must be highly normative and politically loaded.’ (p. 291) By taking this position the editors seem guilty of the logical fallacy of confusing ‘is’ with ‘ought.’ Because bias and advocacy forecasting are the order of the day does not mean that they should be acceptable. The only defensible position for professional forecasters is to faithfully project the future on the basis of their best judgment and professional expertise. This entails a commitment to minimize the impact of factors that would diminish the objectivity of their analyses. Granted, the challenge of controlling bias is great, especially
when forecasts are the basis of important policy decisions, and when forecasters are employees of organizations having vested interests in the results. However, merely because the task is difficult is no reason that the goal should be abandoned. Perhaps it was the editors’ stance on this point that precluded the logical sequel to the descriptive case studies, namely an exploration of ways to improve the objectivity of energy forecasts. The authors of the country essays seem to have been ideally suited for making such proposals, given their knowledge of the country environments within which the forecasts are made. The above criticism does not di~nish the book’s principal achievement of documenting advocacy and bias in energy forecasting, which complex statistical models can easily mask. The editors were successful in attracting contributors having intimate knowledge of forecasting practices in the eight case-study countries and at IIASA. The book is remarkably well integrated to have had thirteen p~ti~ipating writers, which undoubtedly is a result of the continuing guidance the editors provided to the contributors. The editors’ two introductory chapters set the stage well, and their two concluding chapters provide useful summaries of the contributors’ main findings. The book will be useful to a diverse audience, including not only forecasters, but also students of the energy industry, of interest group behavior, and of bureaucratic politics. Many forecasters will identify with the issues raised here and should be reassured in knowing that similar dilemmas they face are not unique, but are commonly shared by colleagues. Randall J. Jones, Jr. Central State ~n~ve~~ity, Oklahoma, USA
Reference Janis, Irving Company,
L., Victims of Groupthink Boston, 1972).
(Houghton
Mifflin
Robin M. Hogarth, Judgment and Choice: The Psychology ofDecision, Second edition (Wiley, New York, 1987) $24.95, 217.50, pp. 311. This second edition of Judgment and Choice builds upon the success of its predecessor. Forecasters
were exposed to an enthusiastic review of the first edition [Corbin (1982)], which cited its summaries of rigorous research while retaining a conversational style and inclusion of ‘thought experiments’ _ using ‘the readers basic intuitive judgment as its raw material’ (p. 219). In one example, Hogarth gives the reader a false outcome to an event, later demonstrating how the reader became convinced of the inevitability of the (false) outcome. The second edition retains these features and if anything, improves upon them. The treatment of judgmeent and choice involves forecasting because choice is seen as reflecting two types of judgement: predictive judgements (forecasts) and evaluative judgements. The quality of choice depends on the extent to which the forecasts are accurate and the evaluations faithfully reflect values. The forecasts of concern to Prof. Hogarth are subjective, intuitive forecasts. His discussion of choice is also relevant because forecasters are frequently called upon to predict choices: how many consumers will choose to pay a particular price for a product or service; how many people will apply for a particular job, or choose an early retirement option; investor choices, voter choices, etc. The first three-chapters of the book (and later, Chapter 6) concentrate on predictive judgements. His review of the psychological literature reads like a catalog of human judgmental fallibilities, including: misattribution of causes to random occurrences; incorrect (causal) interpretations of regression towards the mean, producing overly extreme forecasts for previously extreme observations; failure to appropriately incorporate base rate information into forecasts: inferring the probability of a future event on the basis of how easy it is to imagine the event happening; the lingering impact of whatever initial forecast value was considered, simply because it was the first considered, and adjustments from it are insufficient; use of only a few cues for prediction; use of redundant pieces of information in a forecast as if these were independent of other cues; and failure to seek potentially disconfirming evidence. Not unsurprisingly, the degree of confidence felt by people in such forecasts is misplaced. The reader’s resistance to accepting the validity of the research findings is lessened through Prof. Hogarth’s involvement of the reader in mental exercises where one finds oneself acting in just the way that re-